Law Against Unfair Competition

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Questions and Answers

A company launches a marketing campaign that closely mimics a competitor's well-known branding, leading consumers to believe the products are associated. Under which principle is this MOST likely to be challenged?

  • Exploitation of Reputation
  • Predatory Pricing
  • Denigration
  • Confusion (correct)

A retailer consistently advertises a popular item at a very low price to attract customers, but claims it is out of stock when customers arrive, then directs those customers to a more expensive alternative. What consumer protection regulation does this violate?

  • Aggressive Practices
  • Misuse of Trade Secrets
  • Omissions
  • Misleading Promotions (correct)

A software company discovers that a former employee has shared confidential business strategies with a competitor. Under what legal principle would the company MOST likely pursue action?

  • Misuse of Trade Secrets (correct)
  • Discriminatory Pricing
  • Aggressive Practices
  • Exploiting a Business’s Dependency

A dominant company in a small town threatens to cease all business with its primary supplier unless the supplier agrees to a drastically reduced rate for goods. Which legal principle does this scenario MOST directly engage?

<p>Exploiting a Business’s Dependency (A)</p> Signup and view all the answers

A beverage company releases an advertisement that directly compares its product to a competitor's, highlighting the superior vitamin content based on independently verified lab tests. Under what conditions is this advertising approach generally permissible?

<p>Only if the information is verifiable, relevant, and non-misleading. (B)</p> Signup and view all the answers

An online retailer designs its website to mirror the layout and color scheme of a more established competitor, with the intention of diverting traffic from the original site. Which legal concern does this MOST directly raise?

<p>Confusion (D)</p> Signup and view all the answers

A small business owner discovers that a competitor is spreading false rumors about their product quality, leading to a significant drop in sales. What legal recourse is MOST appropriate for the business owner?

<p>Sue the competitor for Denigration. (B)</p> Signup and view all the answers

A manufacturer sells its products at a significantly lower price in a foreign market than in its domestic market, allegedly to eliminate local competitors. Under what condition is this practice considered illegal?

<p>If the products are sold below cost <strong>and</strong> the intent is to harm competition. (A)</p> Signup and view all the answers

A company abruptly terminates its long-standing agreement with a key supplier without providing any prior written notice. Which legal principle does this action MOST directly violate?

<p>Unfair Termination of Commercial Relationships (A)</p> Signup and view all the answers

A pharmaceutical company is found to have suppressed negative research findings about a drug's side effects, while heavily promoting its benefits. What type of unfair competitive practice does this MOST directly represent?

<p>Omissions (D)</p> Signup and view all the answers

A company pressures vulnerable consumers, such as the elderly, into purchasing overpriced and unnecessary products through persistent phone calls and scare tactics. Which legal principle is MOST relevant in this scenario?

<p>Aggressive Practices (B)</p> Signup and view all the answers

A company discovers its competitor is bribing government officials to secure contracts, giving them an unfair market advantage. This practice violates which principle?

<p>Breaking Legal Regulations (C)</p> Signup and view all the answers

A business owner discovers that a competitor is actively recruiting their key employees by offering significantly higher salaries and benefits, directly causing those employees to breach their existing employment contracts. What type of legal violation is occurring?

<p>Inducing Breach of Contract (C)</p> Signup and view all the answers

A local bakery starts using a logo that is strikingly similar to a nationally recognized brand of cookies, potentially leading customers to believe there is an affiliation. Which unfair competition principle is MOST likely being violated?

<p>Confusion (D)</p> Signup and view all the answers

A retail store advertises a 'going out of business' sale with drastic price reductions, but the store has no actual intention of closing and continues to operate normally after the sale ends. This deceptive practice falls under which category?

<p>Misleading Promotions (B)</p> Signup and view all the answers

A small grocery store in a rural area is entirely dependent on a single supplier for its stock. The supplier begins charging the store significantly higher prices than other retailers, knowing the store has no alternative. Which principle does this MOST directly contravene?

<p>Exploiting a Business’s Dependency (D)</p> Signup and view all the answers

A company includes glowing testimonials in its advertisements, but fails to disclose that these testimonials were paid for and written by professional actors. What unfair practice is this company engaging in?

<p>False Endorsements (B)</p> Signup and view all the answers

What is the primary condition under which imitation of a competitor's product is generally considered legal?

<p>When it doesn't infringe on exclusive rights, create confusion, or unfairly exploit efforts. (C)</p> Signup and view all the answers

A company operating a pyramid scheme recruits individuals with the promise of high returns, but requires them to recruit new members to sustain their earnings. Which type of unfair consumer practice BEST describes this scenario?

<p>Misleading Promotion (C)</p> Signup and view all the answers

A technology company discovers that a competitor has gained access to its source code through industrial espionage. This situation constitutes a violation of what legal principle?

<p>Misuse of Trade Secrets (C)</p> Signup and view all the answers

Flashcards

Deception

Misleading claims that induce consumers into error.

Confusion

Creating market confusion by imitating a competitor’s branding, store design, or slogans.

Omissions

Failing to provide key product information or presenting it in an unclear manner.

Aggressive practices

Using harassment, coercion, or undue influence to manipulate consumer behaviour.

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Denigration

Spreading misleading information about competitors.

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Exploiting a business’s dependency

Taking advantage of a supplier/franchisee who lacks alternative options.

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Predatory pricing

Selling below cost to eliminate competitors, if intended to harm competition.

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Discriminatory pricing

Offering different prices without justification.

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Misuse of trade secrets

Includes industrial espionage and unauthorized disclosure of business strategies.

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Breaking legal regulations

Breaking legal regulations to gain an advantage.

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Study Notes

  • Acts taking advantage of competitors are illegal according to Article 5 LCD, if they involve deception via misleading claims that induce consumers into error.
  • Article 6 LCD prohibits creating market confusion by imitating a competitor's branding, store design, or slogans.
  • Omissions, as per Article 7 LCD, are illegal if they involve failing to provide key product information or presenting it in an unclear manner.
  • Aggressive practices are prohibited if they involve using harassment, coercion, or undue influence to manipulate consumer behaviour, under Article 8 LCD.
  • Imitation is generally legal unless it infringes on an exclusive right, creates consumer confusion, or unfairly exploits another’s efforts.
  • Exploiting a competitor’s reputation, such as through false designation of origin or deceptive branding, is illegal.
  • Denigration, as per Article 9 LCD, involves spreading misleading information about competitors, which is illegal.
  • Comparative advertising is allowed only if based on verifiable, relevant, and non-misleading information.
  • Exploiting a business's dependency, as outlined in Article 16 LCD, involves taking advantage of a supplier/franchisee who lacks alternative options.
  • Terminating commercial relationships unfairly without six months’ written notice is prohibited.
  • Threatening to break business ties to pressure for better conditions is an example of an abusive practice.
  • Predatory pricing (dumping) is defined as selling below cost to eliminate competitors, is legal unless intended to harm competition.
  • Discriminatory pricing, covered by Article 16.1 LCD, involves offering different prices without justification.
  • Misuse of trade secrets, detailed in Article 13 LCD, includes industrial espionage and unauthorized disclosure of business strategies.
  • Breaking legal regulations to gain an advantage, such as avoiding labour laws to reduce costs, is prohibited under Article 15 LCD.
  • Inducing employees or customers to break contracts is an illegal practice.
  • Unfair consumer practices include misleading promotions (e.g., “bait and switch”).
  • False endorsements and pyramid schemes are examples of unfair consumer practices.
  • Coercive selling tactics and pressure sales, especially when targeting vulnerable groups like minors, are considered unfair consumer practices.

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